November 29, 2016
As the Italian electorate goes to vote on Sunday in a controversial constitutional referendum, 89er Alessandro Granato discusses the context and implications of Prime Minister Renzi’s proposals and what this referendum means for wider European politics.
On 4th December of this year Italians will be voting on a referendum for a number of Constitutional amendments – comprising changes to 47 out of a total of 139 articles – that could significantly overhaul its parliamentary system. A system introduced on 1st January 1948 – its efficacy disputed since its inception – and created as a barrier to repeating Italy’s Fascist past. Today the system’s structure comprises two chambers of Parliament known as the Chamber of Deputies and the Senate. Otherwise known as ‘perfect’ bicameralism, it seems it may not be so perfect after all. Unique in Europe, this parliamentary system gives both the Chamber and Senate full competencies; an equal balance of power often seen as the cause for the protracted legislative process that sees an average of 600 hours for a bill to be approved, compared to a Europe-wide average of 128 hours, based on a 2004 study of 17 Parliaments across Europe. In the 70 years since the birth of the Republic, the country has had 63 governments. For many, however, Prime Minister Matteo Renzi’s proposed changes are merely aria fritta – hot air – with some asking, “Do we change everything to change nothing?” In any case, the referendum is set to continue to shake things up for Italy and Europe and make sure 2016’s turbulence continues on into the New Year.
Renzi presented the proposals of the current referendum to the Senate on 8 April 2014, with the final vote for the proposed amendments taking place on 11 January 2016 after much discussion by both chambers. Not the first reform referendum in the constitution’s brief history, with two attempts to change it in 1993 and 1997 failing miserably, another gaining approval in 2001 despite low turn out, and another, proposed in 2006 by then-Prime Minister, Silvio Berlusconi, again failing to gain majority approval given a conversely high turn out. Both now and then, the plebiscite morphed from one focussing on the structural strength of the Italian system, to one focussing on a vote of confidence in the government itself. Vincenzo Scarpetta has recently stated that the Italian referendum “is Europe’s worst-kept secret” and “the significance of the vote Italians will cast on December 4th goes way beyond the substance of this constitutional reform.”
At time of writing, Renzi’s concomitant resignation should the referendum fail is still uncertain, with President Obama recently stepping in to urge Renzi to remain in power irrespective of the vote’s outcome. Attempts have been made to put to bed any histrionic speculation regarding the consequences of a No victory, but it seems the referendum comes at a time of portentous European fragility that Italy now finds itself at the heart of. In allusions to Britain’s referendum, rhetoric has ignited suggestions that a No vote could signal the end of the European project. This comes from the political uncertainty that would surround Renzi’s resignation, which some have said would lead to the dominance of the Eurosceptic Five Star Movement in place of Renzi’s centre-left, Democratic Party. Nobel prize-winning economist Joseph Stiglitz has said that Italy could be the “cataclysmic event” that leads to the collapse of the Euro and the EU; despite his words, many remain unsure of how destructive the political uncertainty caused by a No victory would be. Other than Renzi’s unstable future, the referendum encapsulates a wider endemic instability in Italy that will see Italian politics on the minds of many in Europe in the coming months. Indeed, growing momentum on voting No on both the reforms and the future of Renzi’s prime ministerial career has seen Renzi himself backtrack on his ‘all or nothing’ approach to the referendum’s result.
The referendum aims to curtail the power of the Senate in favour of the Chamber in the Parliament. The Senate would be drastically reduced in size from 315 senators to 100; no longer directly elected in regional elections – members would be chosen by regional councils – this reformed Senate would comprise 74 members of regional assemblies and 21 mayors, with the remaining 5 appointed by the Italian President for ‘special merits’. It would, in other words, become a chamber of regions and municipalities, with limited, specific legislative powers and no veto. Whilst for some this comes as a “streamlining of the legislative process“, others fear that members would be more motivated by party interests than regional concerns. The interpretation of the proposals has been a serious bone of contention, with Renzi stating that he would consider a renewed proposal that would allow new Senate members to be elected directly by voters. Put forward by Ministers Vannino Chiti and Federico Fornaro, they have already been criticised for being in direct violation of the current Constitution and imply wider concerns about the comprehensiveness of overall changes being presented. Despite Italy being a functioning polyarchy, for many the change to the indirect election process of the Senate would be a step too far, putting too much power in the hands of too few in government, and would weaken Italy’s democracy.
The referendum proposes that the government would only need the confidence of the Chamber, giving it the last word in the majority of cases, including the budget, with the two chambers only coming together to decide future constitutional reforms, the election of the Italian President, and the ratification of EU treaties. The ‘shared competencies’ that the two chambers currently possess would be scrapped and individual policy areas would either be the responsibility of the central government, of the Chamber, or of the newly formed Senate – but not of both. The reformed legislative procedures do envisage full participation from the Senate, but its involvement and influence would depend on the nature and scope of every new bill.
A further layer of government, the ‘provinces’ – a layer of local administration – would be abolished and the powers of the National Council for Economics and Labour (CNEL) would be suppressed. This body of 65 advisers in the 60 years since its foundation in 1957 has offered 14 legal amendments, none of which have then been taken into consideration, with 96 opinions written, costing over €1 million. The body has been identified as an economic waste, and its members seem to have unanimously agreed that it’s time to put the body to rest. Concerns have also been raised surrounding the payment and focus of the new senators, who would have to balance their work as mayors or members of regional assemblies across Italy with their responsibilities in the Senate – to include regular trips to Rome for parliamentary sessions – with no additional salary. It would prove a costly travel schedule for those involved, seemingly at odds with the cost-cutting intentions of the overall reforms.
The restructuring of the Senate and its members are factors aligned with the other broader changes politically tied to the referendum. Indeed, the recently adopted new electoral law, known as the ‘Italicum’, is popularly seen as directly linked to the referendum, despite being de facto a separate parliamentary process, and nothing to do with December’s vote. Italy’s Constitutional Court was to issue an opinion on the law on 4th October but decided on 19th September to withhold opinion until after the referendum. The ‘Italicum’ offers a two-round election system that grants a strong majority premium to the largest political party that receives more than 40% of the vote in the first round of national elections, assigning it 55% of total seats. If this 40% margin isn’t reached, then the two largest parties would go for another ballot round to gain a majority, a system thought to provide political stability. Some, like Scarpetta, have noted that this would “disproportionately increase the power of the government of the day” against the opposition. Alongside Renzi’s referendum, most laws would be passed by the Chamber alone, where the government would be “guaranteed an absolute majority”, allowing it to ignore the opinion of the Senate, perceived by some as a threat to any system to checks and balances of government action.
But, as Lorenzo Codogno reminds us, this scheme is apt for a bipolar political system, at odds with the current rise of the Five Star Movement in Italy that has altered the country’s political fabric, making it tri-polar. The controversial Eurosceptic movement is weathering a storm of progressive environmental policies, its first Mayor of Rome – and Rome’s first sindaca, Virginia Raggi – and its highly controversial leader, Beppe Grillo. Grillo, who has openly admired Nigel Farage – even aligning his party with UKIP in the European Parliament – and made flagrantly racist remarks about London’s mayor Sadiq Khan, has left many progressive supporters reeling. Despite this, support for the party remains high, and some are suggesting that a defeat for Renzi in the referendum could spell a future Grillo-run government, one that would be staunchly anti-euro, and would certainly threaten not only Italy’s membership but the future of the Union itself.
Sì or No?
Italian law says that opinions polls can be made public up until two weeks before a referendum, one of the most recent surveys, considered more reliable than similar polls, put a ‘No’ vote at 34%, and ‘Sì’ at 29%, with undecided or abstentions at 37%, a high percentage, which gives some room for manoeuvre. Interestingly, data has revealed that there is a very high degree of consensus on separate elements of the proposed reforms, but that the vote itself is emerging as one perceived primarily as a confidence vote on the current government.
Although currently the odds are against Renzi, the data shows that his victory isn’t too far out of reach and much of his party are canvassing the country campaigning for a Yes. ON the other hand, their No counterparts from other parties are doing the same, including the Five Star Movement and the far-right Northern League.
Support for Renzi’s referendum outside of his own party isn’t forthcoming. Ex-Prime Minister, Mario Monti, has recently come out to urge voters to reject Renzi’s referendum, assuaging the fears of moderate centre-right voters leaning towards a No-vote. His argument provides an image of the wider political paesaggio the referendum finds itself a part of. Monti, who led a staunchly technocratic government, is disliked by many in Italy for the tough series of austerity measures he pushed through during his administration. Monti’s dislike of Renzi has increased with the latter’s tendency to criticise the EU, leading Monti to declare, perhaps somewhat unfairly, that Renzi is guilty of “doing the work of the populists”.
Monti, ignoring the words of the international political establishment and the voices of international businesses, doesn’t seem convinced that a loss for Renzi would pose any great threat to the future of Italy and the EU. It is, perhaps, a troublesome oversight of the country’s failing economy, with debts of 132.7% of GDP, and “exceptionally sluggish growth” lasting from even before the 2008 crash. Indeed, Renzi’s referendum doesn’t just reveal the morphing situation of partisan politics in Italy, it is also closely aligned with an increasingly tense financial situation in the bel paese.
Three of Italy’s major financial institutions are struggling, with international banks like UniCredit and Intesa Sanpaolo plagued by nonperforming loans, and forced to reduce their international exposure. Monte dei Paschi, another large bank acts as the most likely kindle to an already burning volatility. In recent Europe-wide stress tests, Monte dei Paschi was the only bank tested to gain a negative result “which indicated it would be insolvent in the event of a new European economic downturn.” As Harold James argues, the failure of the bank would bruise confidence in the Italian economy with inevitable turbulent political consequences. Renzi’s current manoeuvres are limited by EU rules on bank rescues, stating that bank creditors and capital owners should bear the price of the rescue to avoid the taxpayer having to pick up the pieces for the poor judgement of bankers.
Financial markets at time of writing have shown stock indices for the Italian banking sector diverging from those of the rest of the Euro Area, in response both to Italy’s political and financial instability. In their extensive analysis of the important relationship between the outcome of the referendum on the future stability of Italian banks, Lorenzo Codogno and Mara Monti summarise that political stability in Italy is essential for any kind of recovery of the sector.
It seems that Renzi’s referendum is just the tip – albeit a large one – of an iceberg that will serve to define Italy’s political and economic future, with the European project potentially heading straight towards it. Indeed, the fallout from the referendum result will be intertwined with the future of Italy’s banks, with James arguing that the Italian government – whether Renzi’s or not – “has no choice but to push for an end to the EU’s commitment to fiscal austerity” and a “much larger EU public spending initiative, directed primarily at infrastructure investment.” Renzi is playing a dangerous game with this referendum and, along with his demands in the banking crisis, could see him re-balance the Germanic dominance of power in Europe towards a more Mediterranean expansion-focused flavour, based on the age-old ingredients of growth stimulation, job creation, and infrastructure spending. Renzi clearly wants to take on the status quo in Italy and in Europe but he must be very careful: he is whipping up the potential for an anti-EU sentiment that may not just see the end of his political ambitions and career, but could tilt the tide of opinion towards leaving the eurozone, spelling serious trouble for the European Union. In any case, Italian politics and Italian finances will continue to prove a flashpoint for its European partners in the year to come. It seems we should keep our seat-belts fastened: the storm that hit us this summer is far from over.
Written by Alessandro Granato1989 Generation